SEC Interventions and the Frequency and Usefulness of Non-GAAP Financial Measures

Abstract:     
This paper examines the effect on both firms and investors of two SEC regulatory interventions related to disclosure of non-GAAP financial measures. There are three main results. First, both periods after the SEC's interventions are associated with a decrease in the probability of disclosure of non-GAAP financial measures and this decline accelerates through the period. Second, all else equal, investors do not value firms higher or lower because of the disclosure of non-GAAP financial measures. Finally, investors accept as generally transitory the adjustments to GAAP income made by I/B/E/S financial analysts, but not the additional adjustments made by firms.

Number of Pages in PDF File: 48

Keywords: non-GAAP financial measures, Regulation G, disclosure

JEL Classification: M41, M45, G12, G29, G38

working papers series